What is the role of a central bank in controlling inflation?

A central bank controls inflation by adjusting monetary policy, primarily through the manipulation of interest rates. When inflation is rising, the central bank may raise interest rates to make borrowing more expensive, which in turn reduces spending and investment in the economy. This can help cool down demand and lower price increases. Conversely, if inflation is low and economic growth is sluggish, the central bank may lower interest rates to encourage borrowing, spending, and investment. Central banks also use other tools, such as quantitative easing, to manage inflation and stabilize the economy.